CESS Experimental Economics Seminar

March 10 – Peter Schwardmann (Carnegie Mellon University)
Title: “Anticipatory Anxiety and Wishful Thinking ”

March 31 – Isabelle Brocas (University of Southern California)
Title: “Dynamic Coordination in Efficient and Fair Strategies: A Developmental Perspective”

April 07 – Frank Schilbach (Massachusetts Institute of Technology)
Title: “Learning in the Household”

April 14 – Eugenio Proto (NYU Visitor)
Title: “Reverse Bayesianism Revising Beliefs in Light of Unforeseen Events”

April 21 – Yucheng Liang (Carnegie Mellon University)
Title: “The Inference-Forecast Gap in Belief-Updating” 

April 28 – Andreas Blume (University of Arizona)
Title: “Mediated Talk: An Experiment”

May 5 – Sally Sadoff (University of California San Diego)
Title: “Earnings, Parenthood and Gender Differences in Choice of Educational Field”

 

Weekly Seminar: Sally Sadoff, “Earnings, Parenthood and Gender Differences in Choice of Educational Field”, Thursday, May 5, 2022

Despite decades of increasing gender equality, there remains a large gender gap in earnings. Recent work has highlighted two factors contributing to gender differences in labor market outcomes: gender differences in choice of college major and gender differences in the relationship between parenthood and earnings.  Bringing these together, we study the expectations and preferences of college applicants in order to understand the role of parenthood considerations in shaping choice of college major. We conduct a large-scale survey experiment of college applicants in Denmark, where applicants submit their rank-ordered choices to a national clearinghouse that matches applicants to degrees. We elicit beliefs about labor market and family outcomes ten years after graduating from each of their top choices; and incorporate national administrative data on realized outcomes in prior cohorts. We find that applicants’ beliefs about the relationship between college major and both earnings and parenthood are well aligned with the outcomes of prior cohorts. However, applicants do not anticipate gender differences in the relationship between parenthood and earnings. Examining preferences, we find that, compared to men, women have higher compensating differentials for parenthood, as well as for marriage/cohabitation, and satisfaction with work and studying.  Gender differences in preferences account for about one-third of our predicted differences in the gender composition of majors; gender differences in expected outcomes account for about two-thirds.

 

Weekly Seminar: Andreas Blume, “Mediated Talk: An Experiment”, Thursday, April 28, 2022

Theory suggests that mediated cheap talk has the potential to improve information sharing and welfare. This paper experimentally investigates whether and how this potential can be realized. We compare mediated (cheap) talk with direct (cheap) talk and explore the impact of language (that is, the framing of messages) on this comparison. We find that, consistent with theory, mediation facilitates information transmission, independent of the choice of the language. The majority of subjects appear to understand the effect of an exogenous mediator randomizing messages. At the same time, there are systematic departures from the theory prediction that keep behavior bounded away from complete separation (defined as the sender using a separating strategy and the receiver best responding to that strategy). These departures are largely consistent with some of the subjects perceiving mediated communication as direct communication. Receivers over-interpret messages (take messages as more informative than they are) under both direct and mediated talk. Under direct talk, there is initial overcommunication by senders that is attenuated with repeated interactions. Under mediated talk there is stable under-communication.

 

Weekly Seminar: Yucheng Liang, “The Inference-Forecast Gap in Belief-Updating”, Thursday, April 21, 2022

Individual forecasts of economic variables show widespread overreaction to recent news, but laboratory experiments on belief updating typically find underinference from new signals. We provide new experimental evidence to connect these two seemingly inconsistent phenomena. Building on a classic experimental paradigm, we study how people make inferences and revise forecasts in the same information environment. Participants underreact to signals when inferring about underlying states, but overreact to signals when revising forecasts about future outcomes. This gap in belief updating is largely driven by the use of different simplifying heuristics for the two tasks. Additional treatments suggest that the choice of heuristics is affected by the similarity between cues in the information environment and the belief-updating question: when forming a posterior belief, participants are more likely to rely on cues that appear similar to the variable elicited by the question.

 

Weekly Seminar: Eugenio Proto, “Reverse Bayesianism Revising Beliefs in Light of Unforeseen Events”, Thursday, April 14, 2022

Bayesian updating is the dominant theory of learning. However, the theory is silent about how individuals react to events that were previously unforeseeable or unforeseen. We test if subjects update their beliefs according to “reverse Bayesianism”, under which the relative likelihoods of prior beliefs remain unchanged after an unforeseen event materializes. Across two experiments we find that participants do not systematically deviate from reverse Bayesianism. However, we do find well-known violations of Bayesian updating. Furthermore, decision makers seem to be ex-ante unaware – they do not expect outcomes that they have not yet observed or have not been informed about.

 

Weekly Seminar: Frank Schilbach, “Learning in the Household”, Thursday, April 7, 2022

We study social learning between spouses using an experiment in Chennai, India. We vary whether individuals discover information themselves or must instead learn what their spouse discovered via a discussion. Women treat their ‘own’ and their husband’s information the same. In sharp contrast, men’s beliefs respond less than half as much to information that was discovered by their wife. This is not due to a lack of communication: husbands put less weight on their wife’s signals even when perfectly informed of them. In a second experiment, when paired with mixed- and same-gender strangers, both men and women heavily discount their teammate’s information relative to their own. We conclude that people have a tendency to underweight others’ information relative to their own. The marital context creates a countervailing force for women, resulting in a gender difference in learning (only) in the household.

 

Weekly Seminar: Isabelle Brocas, “Dynamic Coordination in Efficient and Fair Strategies: A Developmental Perspective”, Thursday, March 31, 2022

We study in the laboratory the behavior of children and adolescents (ages 7 to 16) in two repeated coordination games, the stag hunt and battle of the sexes. Coordinating on the efficient and fair long run outcome (EFO) requires participants to share intentions and beliefs. This exercise is arguably complex in the battle of the sexes, as it requires taking turns between the two static Nash equilibria, hence coordinating the strategies. By contrast, in the stag hunt it only requires repeating the action that leads to the Pareto efficient outcome, hence coordinating the actions. We obtain four main findings. First, for both games, we show a significant and remarkably stable increase in the ability to coordinate on the EFO with age. Second, the majority of participants in all ages adhere to one of a small number of relatively simple strategies. Third, jointly profitable outcomes are more prevalent in the stag hunt than in the battle of the sexes. Last, behavior improves between the first and second supergame. This evidence suggests that we gradually learn how to share intentions and beliefs, an ability that we train rapidly and export to new interactions, but that is limited by game complexity.

 

Weekly Seminar: Peter Schwardmann, “Anticipatory Anxiety and Wishful Thinking ”, Thursday, March 10, 2022

It is widely hypothesized that anxiety about adverse future outcomes motivates people to adopt comforting beliefs or to engage in wishful thinking. However, there is little direct causal evidence for this effect. In a first experiment, participants perform a visual pattern recognition task where some patterns may result in the delivery of an electric shock, a proven way of inducing anxiety. Participants engage in significant wishful thinking: they are less likely to correctly identify patterns that they know may lead to a shock.  A second and third experiment establish that participants also engage in wishful thinking in anticipation of monetary losses and that the phenomenon is robust to another perceptual task, which draws on different cognitive processes. Across our three experiments, greater ambiguity of the visual evidence is associated with more wishful thinking and raising incentives for accuracy does not decrease it. Our within-subject design allows us to detect wishful thinking at the individual level. We find that wishful thinking is heterogeneous across and stable within individuals.